EPS Contribution: When Is Pension Deduction Mandatory For Employees?

The wage ceiling hike for Employees’ Provident Fund Organisation (EPFO) subscribers from Rs 15,000 to Rs 25,000 can not only bring more subscribers under the mandatory coverage but also increase their pension payout in the future, depending on how much of their service period falls under the revised ceiling. As per the rule, both employee and employer contribute to the EPFO schemes, 12 per cent each, but their contributions are used differently for the schemes. While an employee’s full 12 per cent of salary (basic + dearness allowance) contribution goes towards the employees’ provident fund (EPF), an employer’s contribution goes towards EPF and to the employees’ pension scheme (EPS), in the ratio of 3.67 per cent and 8.33 per cent, respectively.

This is a mandatory deduction if an employee’s salary is up to Rs 25,000 per month. Earlier, the wage ceiling for these deductions was Rs 15,000, which, effective September 17, 2026, has become Rs 25,000. In simple terms, those receiving a salary up to this amount are mandatorily registered under EPS, and those getting above are excluded from the coverage.

The EPFO also clarifies it in a recent post on X, formerly Twitter: “If your monthly salary is Rs 25,000 or less, EPS membership is mandatory as per eligibility. If your monthly salary is more than Rs 25,000, EPS membership is not mandatory.” It further mentions that if you were not an EPS member previously, you are not eligible for EPS membership.

In another post on October 3, 2026, it clarified that “If your wages were more than Rs 25,000 at the time of joining your first job, you are not eligible for EPS membership.”

So if EPS deduction is happening in this case, you may reach out to your employer, and if the deduction is not stopped, lodge a complaint on EPFiGMS.

Is Someone Getting More Than Rs 25,000 Monthly Salary Eligible For EPS Deduction, Effective September 17, 2026?

Ketan Das, business head, FinRight Technologies, explains, “It is mandatory for people who are earning up to Rs 25,000 as basic and DA. But if someone is earning more than Rs 25,000, it depends on their previous employment. If they were part of EPS, they will still be part of the scheme as an EPS member”, and adds, “They continue to be in the schemes even when their salary later increases.”

Simply put,

• An employee getting Rs 25,000 monthly wages in the first job is not eligible for EPS deduction.

• An employee who has already been a member of EPS will continue being an EPS member even if the monthly salary is higher than Rs 25,000.

Can An Employee Opt Out Of EPS When Wages Are Low And Opt In When Wages Are High?

While the opt-in option for a higher salary is available in case of EPF, EPS is rather an inflexible scheme which does not offer any opt-in or opt-out option to employees.

If one wants to be a part of the EPS, Das suggests a solution: “If your salary is above the wage ceiling, you can't opt for the EPS. However, you can negotiate your salary accordingly if you want to be a part of the EPS scheme.”

Though joining first service at a salary of more than Rs 25,000 makes one ineligible for EPS deduction, can such an employee be part of EPS in future low-salary job assignments?

If An Employee Leaves A High Paying Job And Joins After A Gap Of A Few Months Or Years At A Lower Salary, Will EPS Be Deducted?

The rules aren’t clear.

Das points out, “While an employee who joined service above the wage ceiling may have been excluded from EPS initially, the rules DO NOT CLEARLY STATE that such an employee can never become an EPS member later.”

“Therefore, if the employee subsequently joins another employer at a salary below the wage ceiling, EPS applicability may depend on their specific employment history and circumstances. Since this could create issues at the time of PF transfer or withdrawal, it is advisable to obtain and retain proper clarification/documentation from the employer regarding the employee’s EPS status”, he adds.

Remember that EPS deduction means a pension after retirement, and a higher deduction means a higher pension. While EPFO estimates that the wage limit hike will benefit around 5.1 million subscribers, it’s crucial to know whether you are using these financial security options or not.